Commentary on Radio & Audio

October 08, 2014

Two Giant Stories For Radio

Radio could use a shot in the arm, a boost, something to shout about to our advertisers -- and, frankly, a story to keep us psyched up. (How's that for a '70s term?)

Two stories broke this week. Each from a giant advertising concern. In fact, the same one.

Story #1: Omnicom Media Group Signs $200 Million Deal With IHeartMedia The story is that Omnicom is doubling its spend in radio over last year. It's a powerful story when one of the world's largest ad agencies validates the power of radio. Though you could whine that it's not your company, it's a powerful story for radio, and that will help every radio broadcaster. To quote that WSJ story:

"Radio is still a really important medium to a lot of our clients, especially our retailers," said Omnicom Media Group CEO of North American investment John Swift. "For a lot of our retailers, from a traffic-driving perspective, [radio] complements the rest of its media at a very efficient cost."

Mr. Swift said the increase in investment with iHeartMedia is a reallocation of spending within the radio category among fewer partners rather than a shift of spending across categories.

"This isn't about shifting spend from one channel to another," Mr. Swift said. "It is more about focusing on deeper partnerships with a select number of partners, combined with some growth in spend as well."

OK, so iHeartMedia got a bigger piece of Omnicom's radio money shifted to its radio, digital, and entertainment platform. That may sting a while, but it certainly is great salesmanship by the iHeart team, and especially President of National Sales/Marketing and Partnerships Tim Castelli.

The next step, of course is that every radio company needs to present a platform and show they too have great abilities, and get Omnicom and other agencies to consider upping their spend.

When Bob Pittman came on board at what was then Clear Channel, I wrote a piece saying he would be good for radio because of his vision, his big thinking, and his ability to open doors. This is more evidence. And though iHeartMedia is benefiting now, don't kid yourself: The positive impact of this will ripple across all radio.

What I also find exciting is that iHeart broke new ground. Rather than just selling radio spots, they're selling their whole platform, and "as part of the partnership, iHeartMedia will work with Omnicom Media Group to develop new audio and cross-platform advertising products for the agency's clients and provide research on the efficacy of clients' campaigns." Brilliance. In this world it has to be about giving the clients exactly what they need, not just what we want to sell them.

Story #2 Omnicom Advises Marketers to Move 10 percent to 25 percent of TV Ad Dollars to Online Video The story here, from the same media giant, is that online video is hot and that this major agency is shifting 25 percent of television budgets to online video. The company that oversees roughly $54.4 billion in advertising spending around the globe and advises advertisers such as PepsiCo, Visa, McDonald's, and Apple is showing that it has less confidence in TV and growing confidence in online video.

This isn't important because it hurts television. Frankly, a 25 percent loss of business is a sad thing for any industry. It's important because Omnicom did not shift 25 percent of radio budgets to digital, and because, in fact, the organization just demonstrated its confidence in radio. Again, this is an important story to share with advertisers.

It's important not to miss the larger point of these changes, though. Omnicom is all about what advertisers are asking for and the trends they are seeing. This investment in radio is because iHeart brought a platform that met their needs, including digital radio and customized content. Understanding the whole picture is important when you relay this story to advertisers.

Selling radio is no longer about spots. It's a much deeper proposition. It's very much about your platform, which includes your streams, your digital offerings, your radio product, listening carefully to what your advertisers are asking for, and finding a way to deliver it. It's no longer "If you build it, they will come." It's about, "If they ask for it, you will build it."

Comments

Terrestrial Radio has a couple of big issues to overcome to compete with streaming radio:

1. Quality. Music radio is dealing with digital files that are mastered to sound loud on earbuds, then these highly compressed files are put through their Optimod or Omnia and the squashed audio goes into digital distortion. And when a radio station streams their station, they usually do it at 48 or maybe 64 kbps. Even most HD Radio stations broadcast at 64 kbps bandwidth. The good streaming services are streaming at 128 kbps and above. Streaming audio sounds exponentially better than FM radio. Bring back high-quality FM broadcasting with dynamic range.

2. Clutter. Most FM music stations are running spotbreaks that are close to 8 minutes long. 10-15 units in a break is the new normal. Debt loads by group owners have made radio listening unbearable. Make the User Experience better than what people can get on streaming services by managing these major tune-outs. Find new ways to monetize the broadcast radio station.

Just as there was a big migration from AM to FM in the 70s, now the migration from FM to streaming is underway. Once the train leaves the station, there's no way to bring it back. Urgent attention is needed to keep traditional radio relevant.

Regardless as to broadcasters either ability or willingness to commit resources to such necessary multi-platform propositions, our industry's growth in great part depends on being able to generate results that advertisers can measure to the penny. Having walked the talk on this four times in four markets (two in ownership), I can send any interested parties a summary as to how they can do it. andy@andymcnabb.com